YC Response - Guide to your first 10 Customers (& the path to PMF)

Okay, so a couple days ago, YC released this awesome video. I think it's titled something like Why Founders Shouldn't Think Like VCs, and it's a great video about thinking about the zero-to-one stage. Um, a lot of really useful points. One of them that was made that I wanted to double-click on was how difficult it is to get your first customers. That's about this point in the video. I think it's early on. And Dalton, who has, by the way, amazing hair, I am very jealous, makes a really good point that getting your first customers is really, really hard. Many founders think it's easy. Many founders like don't focus on this necessarily. They think it's just going to happen. But then when you do focus on it, you realize just how difficult it is to find your first customers on the path to product market fit. And they kind of leave it there. And so what I wanted to do is I wanted to record a video for you on how to think about getting your first 10 customers based on what I've seen work. I am no expert. I will go through that in a second. But, um, I've done this a couple times. And so I thought this might be helpful. So yeah, this is Rob's guide to your first 10 customers. And yeah, it is that hard. It is that difficult. So first question is like, who the hell am I and what do I know? I came to startup land from a traditional business background. So McKinsey, went to Harvard Business School, and then thought, you know what, like, I'm totally qualified to be a B2B software founder. Which was obviously ridiculous. So I got wrecked for my first 2 years as a founder, right? We spent 2 years in this pre-product market fit hell, kind of like doing all of the things that seemed important, but I don't know, just nothing worked. And then somehow we did a Hail Mary pivot and went $0 to $4 million ARR in the next 2 years. Which like, yeah, people have done $0 to $100 million in ARR in 2 years. Like, I'm not, I'm not the kind of like expert on all things growth, scale, product market fit. But this experience changed my mind about what matters in the early stage. And so it was kind of my red pill. And so I thought it might be helpful to like start testing that with other companies. And so I've kind of become obsessed with B2B product market fit, the process of finding your first 10 customers and learning from them and getting from $0 to $1 million ARR. And so like last year I helped 6 B2B startups get to their first million ARR from usually sub-$100K and 20, 25— I didn't actually keep count— startups, B2B startups get to their first 10 customers. And the whole point of that is like I'm trying to figure out what actually works and what doesn't here. And so I started running a small program that a lot of YC startups join kind of like a little bit after Demo Day when they've raised money and they're thinking about how to figure out how to get from this kind of like excitement hype to how do we build a solid business that scales. And so, yeah, so that's kind of like my experience. My sense is on all of this, if you're in this pre-product market fit pain cave, you're not alone. And this stage is like super counterintuitive for smart people who think deeply about things. And so you're not crazy, you're not dumb. This is just a very hard stage. That I don't— I think most startup advice out there kind of steers you straight into the iceberg. So like, let's— I'll just walk you through the, the, my experience on this and then we'll jump into how do you think about your first 10 customers? What matters? What doesn't? All that good stuff. So yeah, for my first 2 years, I did like all the things that in theory you're supposed to do following all the books and best practices on startups. So we did the kind of customer discovery, lean startup validation type stuff, hypotheses, experimentation, all that stuff. We did a bunch of customer surveys, willingness to pay analyses. We had like the bulletproof logical case for why this was going to be big. We even had pilot customers using our MVP, loving it, absolutely loving it, giving us great feedback on it and relying on it. And so based on that, we were able to raise, we built out product and engineering, we built out the engine, on like basically the Agile engine. We had a product roadmap that made a ton of sense to get us from where we were to where our vision was. And we were on the path to like SOC compliance, right? So SOC 2 to unlock the enterprise was, you know, that was right, obviously the next step. On the go-to-market side, we had all this kind of, we had customers who were using our MVP, loving it. And so our sense was, okay, how do we start to scale this? And we looked into predictable revenue and all that good stuff. And so, you know, we had done the work to identify a beachhead market. We had built all the sales stuff and marketing stuff you're supposed to have. BDR on board doing cold calls and all the good stuff. And we had a sales plan in place and, you know, our VCs introduced us to a a sales leader hire. So yeah, absolutely, we're going to scale this. The problem with this is that it didn't work. And I, in most of my experience, like this, this kind of approach doesn't work. It sounds right, it feels right, it follows the quote unquote best practices that you'll, you'll read out there. But we kind of went through 2 years of pivot hell on this because customers weren't pulling. And, and so I want to share kind of like what the next 2 years look like because they were like super different. And they wound up, they brought us to a very different place. And this is kind of what, what broke my brain about it. I think the first 2 years we basically did all the things that sound right and seem important, but didn't matter ultimately. And the next 2 years we did only the things that were essential and like literally nothing else. So what I'm going to show you here is not how I would build a company today. There are a lot of problems with this approach, but it got to the essential components of like what actually, what is at the core of what matters. And so that's, that's what I think will be instructive. So we didn't do any customer discovery or research. We had somebody call us and say, hey, I need help with this. I'll pay you to help me with this. I've heard about you. I don't want the product you have. And so we were like, all right, screw it, we got nothing else to do. Hail Mary pivot, why not? The product was me and Google Sheets until $100K ARR, and we just like change, change it up. It was me manually delivering everything. Then like we would kind of engineering or engineer would basically build stuff that would help me not die as I delivered product. And then eventually we like built built the product on top of that. There wasn't like a formal process, it was just build fast, ship daily. I was really inspired by David Cancel's book Hypergrowth about how they structured engineering teams. And so we just kind of like took that approach. We didn't even have a customer login until a million ARR. Like, again, wouldn't do that. But we, like, we just kind of focused on what they would pull. And so on the go-to-market side, we didn't have a website until a million ARR. Our customers could not pronounce our company name. Again, I don't recommend it. And we didn't have marketing materials or a fancy demo. It was literally like we had 4 slides, maybe 3 or 4 slides that we used with direct sales. And, and so, yeah, we churned our first 3 customers pretty hard, but we learned from that and started failing a lot less over time and eventually figured out what the market really wanted. And so basically what we did here is we focused on what the market would pull and nothing else. And here we focused on kind of what we wanted to push. And yeah, with, with resulting results or with, with resulting outcomes. And so what I typically see founders do at this stage and what was happening in my mind at this stage was basically that it feels like there's a million things you should be focused on and you're not sure what of that actually matters and what doesn't. And so you have a laundry list of tasks and things in your brain of, of, well, maybe we should do organic social, maybe we should do dark, like, but there's all of this stuff that feels important. Maybe we should do PLG, maybe we should do this other thing. Like, how do you figure out what actually matters? The like worst piece of this is that most of those things that are in founders' minds, they were in my mind, like reading the traditional startup books and like seeing most of the traditional like investor advice and reading startup success stories, which are mostly historical fiction, like those things steer you into the iceberg. They I actually think you'd be better just like locking yourself in a room and coming up with like, okay, what's, what's like minimum essential to build a business? Like we need customers, we need to figure out that, like, let's just do that. It's better than these like complicated processes and like, yeah, a bunch of historical fiction about how startups came to be. And then like ultimately there's this core problem, which is we're not crystal clear on what product market fit is. Or how to get there. Like basically the state of the thinking in startup world is either, either like bad definitions that aren't helpful, or it's a bunch of stuff of here's what it feels like when you have product market fit, which is great in theory, but not instructive if you're not feeling that. And so like, yeah, so that's the core thing. So that's what I want to get to here. So my thesis is that 0 to 10 customers and product market fit is actually kind of simple. And it's— we'll get into this later, but it's like necessarily simple. The way to get to product market fit, the way to figure out 0 to 10 customers and the way to think about this is you sell and deliver to figure out what you should be selling and delivering. And like in time, the whole thing is about repeating a customer success story, a case study almost. That's what product market fit is. It's just the ability to repeat a case study. The startup best practices out there make everything way more complicated than this, which is super error-prone. The more complicated something is, the more error-prone it is. And like, we'll get into this, but the epistemic claims, the claims about what's capable, which are capable of knowing, from like traditional startup thinking is like insane. Like these, these claims are ridiculous when you piece them apart. When you're following what you, what feels right or what, you know, what traditional advice would give you on how to find your first 10 customers, you think that one of these 3 things is the point of your first 10 customers. Right? The point of our first 10 customers is so we can start to scale and get, you know, we need to get to 10 customers to get to 1,000 customers. So that's the point of our first 10 customers. Second piece here is like, we need to validate our product, or we need to validate that we have product market fit. What we typically think when we think about the point of our first 10 customers, or it's we need to hit these milestones for product market fit or whatever it is so that we can raise our next round. These things like maybe sound right to you. They, they, they may feel intuitive to you. My sense is that these things are absolutely counterproductive and they make like, they, they sound right, but when you dig into them, you realize like they're making some crazy claims. Some crazy claims about what, what you're capable of knowing at this stage. I want to just pull out a couple of them to show you how crazy this is. So the first claim that, that this line of thinking will give you is that you can know most of what matters and like what's worth testing before you sell and deliver to your first 10 customers. That's kind of crazy when you think about it. Second is that, like, you can validate a product or find product-market fit without selling and delivering. That makes no sense when you really piece it apart, right? For some reason, we think that because we followed some complicated innovation process in some fancy book, that, that means we have validated a product or and we haven't sold and delivered. That is insane when you think about it. There's this other piece here. The kind of other implication is that product development and customer development are like two separate things. So we build the product and then we go sell the product, that these are separate things, that these things evolve independently or they're solvable independently. And like, that doesn't make any sense. And finally, like, there's this core assumption in all of this that you can basically split a business into different parts and de-risk or validate parts, and then the whole will work. That again, like, think about that for a while and This makes no sense. This makes no sense. You have like the only way to figure out what to sell and deliver and what product the market actually wants is by selling and delivering. Nothing else makes sense. And so when you think this way, when you think this way in terms of the point of our first 10 customers is to validate our product, right? You're gonna do some dumb things. And I've done these before. I've done these before and it's been really painful. So you're going to throw your product at customers. You're going to basically say, okay, our product, like we validate our product, now we need to sell it, right? And we need to get customers on it and using it and whatever. And so you throw your product at customers in your sales process and that makes sales difficult. Then it also, once if you get people to buy, when you, when you can kind of like strong arm a couple of people to buy it, or use it, right? You still throw your product over at them. They're not successful when they buy. And the root of this is that you don't know how to make them successful because you don't know what success is in their terms. And so what that tends to lead towards is you assume that, okay, our product is not the right one for the market. Like, we don't have product market fit because people aren't using our product and loving it. And so you tend to pivot ceaselessly. And what comes out of that is you never can find product market fit because you're always throwing your product at customers versus— well, I'll explain, I'll explain the other piece here. But so that's thing one. Thing two that you typically do when you have that kind of mindset, that the point of your first 10 customers is to validate that you have product market fit. It's you assume that you need to know or even can know everything in advance. And so you build too much. You do a ton of research and customer discovery and experimentation and all this stuff that seems important and seems like you're doing real work, but really is LARPing at the end of the day. And now the problem with LARPing, it doesn't, you know, seems like she's having a blast. What's the problem with LARPing? The problem with LARPing is when you're LARPing and you don't realize it. It's basically we're doing a bunch of things that seem important and we're working nonstop. But it turns out we're wearing like a fairy costume in the woods with a wooden sword, right? Like, and we don't realize it. We don't— it's, it's— I don't know how to close that metaphor. But, but the problem with LARPing is we don't realize we're LARPing and company doesn't succeed because we do a bunch of work, but not what actually matters. So All that to say, the real point of your first 10 customers is to figure out at least one hell yes customer success story by any means possible. We're gonna unpack that, but what it basically means is that we don't know this in advance. We have to figure out how by any means necessary to get at least one customer to hell yes and understands all the context around what were they trying to achieve, how did we help them achieve that, and how do we take that success story and then how do we repeat it, right? So once you figure out this customer success story, then you earn the right to figure out how to repeat it eventually you learn how to scale it. And based on that, that's kind of, this is the process by which you determine the real product opportunity, the real market shape. This is emergent stuff. Like any other approach that assumes that you can know this stuff before your first 10 customers is like, I mean, it's extremely difficult. And, like, wildly error-prone. Some people, you know, some people can do it and some people are lucky. Some, some people are just like ridiculously 0.01% talented and maybe they can do it. But the general claim that you can know this before your first 10 customers, that you can really have the shape of it and that this doesn't evolve and unfold in time as you work with customers, um, it's like the height of epistemic arrogance. You have to figure this out in the process of selling and delivering. And so like the implications on this are that you need to know less in advance. You figure it out along the way. And a lot of the answers of how your business works emerge in the process of your first 10 customers and beyond that, right? Like these things are all emergent things that we often think we need to know before we have our first 10 customers, right? And these are things that you really kind of can't know. Your ideal customer profile, what value you provide, you provide and what the right pricing structure is or the way to think about pricing, your messaging of what's going to resonate and what's not like your perfect website. What the product opportunity is, what direction you're going in, what unique value you provide versus alternatives in your customers' minds. Even like things like what's the TAM for this and what's the market shape? Like where do, where, what is your market? This is an emergent thing based on what's the success story that you're going to repeat and how is that going to evolve in time? That's kind of like Really hard to know that in advance. Who are competitors? Who are your alternatives? That also emerges. What's your scalable go-to-market channel? Again, this, this stuff, this and many other things that we think we need to know in advance are really emergent properties. So what's the path to hell yes? Well, you sell and deliver. How do you get to your first 10 customers and figure out that one customer or that couple of success stories that are hell yes success stories. You sell and deliver because that's the only way to figure out what to sell and deliver. And you do this by any means necessary. This means hands on, like you basically, the way I think about this is you have to force them to value whoever, whoever your buyer is, you have to force them to value You have to force them to the point of like when they say hell yes, because you have to figure out what value is in their terms. And so that means white glove support, like go and show up at their doorstep and help them accomplish whatever it is. You know, you can do this with an ugly product and a lot of elbow grease, right? This is, yeah, this is just do it by any means necessary. And this doesn't scale. That's the point. That's, that's, of course it doesn't scale because you have to figure out in the process of your first 10 customers or first 10, 20, whatever it is, what is worth scaling. You can't know that in advance, or it's almost impossible to know that in advance. The implications of this are what should you focus on? What actually matters in your mind? You're 0 to 10 customers. Focus on serving your current customers and getting them to hell yes and figuring out what that is and finding your next customer. Nothing else matters. Nothing else matters. As you do that, it is really intellectually challenging and honestly like intellectually fascinating to iterate on what and how you sell and what and how you deliver. Because you're basically gonna learn, okay, what are they just kind of like through the process of selling and delivering, you're gonna have little epiphanies that help you figure out things like what are they really trying to achieve? What is success actually in their minds? Why did they need to change out of all the things they could possibly do? Why did they prioritize this? What options did they consider? What options are they considering? And where do you fit in versus their other options? And what makes you a hell yes versus others? Right? And there's a host of other things that I'm not going to go like into too, too much detail on. But these are the things that you just kind of get the opportunity to pay attention to in the process of your first 10 customers., and you're grappling with this in real cases, not theoretical cases, and that's a lot more fun. It's also super painful, which brings to the kind of core conundrum here for product developers. Basically, like, what the hell are we selling and delivering? This is— this brings us to a paradox, and I want to start— I want to introduce you to this paradox by way of a quote that has never been said in the history of Earth. So what are we selling and delivering? Has anybody on Earth ever said, amazing, today's the day I get to buy new business software? No, that has never been said. And if I were a betting man, I would say that will never be said unironically ever. But that puts forth a paradox, the product-market fit paradox, or the product paradox, or the innovator's paradox, call it whatever you want, which is our goal is to build a product that people want, which is cool. But the problem is No one gives a shit about your product. No one cares about your product. No one cares about your goals. No one cares about you. No one cares about your company. And I can guarantee you nobody cares about how you envision the world should work, how you think the world should work. The people you want to serve care about themselves. So how do you build a product that people want while realizing that, like, nobody cares about your product. So the resolution to this paradox is something that Ryan Singer from Basecamp, Bob Moesta, the architect of Jobs to Be Done, They've introduced some terms that when I understood these, or when I, when I started to understand these, it got a lot clearer about how to build something people want. They're terms from economics, demand and supply. But we, we can apply them in the micro sense to a business opportunity, a startup opportunity. The concept of demand is basically what do people want to accomplish, whether or not you or your product exists. This is what do they want, what do they want to accomplish, what causes them to need to change, how do they think about change. How do they think about their options? All of that exists whether or not you exist. You have no control over this. What you do control is on the supply side. Supply is the product you build, your marketing, your go-to-market motion. It's all the things that you do and you control. The challenge is that supply is only relevant based on demand. Basically, demand is upstream of supply. And so to build something people want, you have to look at it from the demand side on what they want whether or not you exist and find some way to design supply such that it fits there. I didn't know the term demand. I didn't have this concept of the thing people want to accomplish whether or not I exist. And so I always thought that people wanted my product. And obviously I'm selling my product. I'm selling this. I'm building a product, I'm selling the product. I didn't realize that I was just focused on supply and I was ignoring demand. This is why we build so many things that the market doesn't care about. And the resolution is to think about demand. And so here's a simple cheat sheet on this. Product market fit is basically your ability to repeat a single customer success story that gets customers to help. Yes, the path to product market fit is sell and deliver to figure out what you sell and deliver. Basically sell and deliver to figure out a replicable case study, customer success story, whatever. How do you sell and deliver? Again, you use the customer success story to repeat the success story. And who do you sell to? Basically, what kind of person and when do they say hell yes to this customer success story? This is the simple cheat sheet to your first 10 customers and the path to product market fit. We'll get into tactics in a little bit, but, but yeah, this is, this is how to think about it. Now, This next slide is probably gonna be confusing, but it's really important. This is simple because it has to be simple. This is not simple to be cute. It is simple. What— the process of finding product-market fit must necessarily be simple. It can't be complicated. The reason for that is that the complex systems that work and we'll consider a fast-growing company as part of a— as an example of a complex system that works. They are generated. They're not blueprinted. They're not planned. They happen through a series of transformations. And the processes that generate those transformations have to be simple. They're not complicated. The more complicated a process is, the more error-prone it is. The more likely the system is to fail. And the last point here is like the hard one to articulate, but it's complex systems are generated through a series of whole system transformations. Basically, to put this into startup terms, we have to focus on the end-to-end customer success story. We can't focus locally on individual pieces and try to optimize each of those without considering the whole. Hopefully that makes sense. Basically, my— this is my argument for why basically all the startup best practices and processes out there steer you straight into the iceberg and sound right but aren't right, because they don't respect how complex systems that work come into being. Anyway, super nerdy, reach out. This, this is somewhat based on the work of Christopher Alexander and John Seton and a couple others. I think there is something really important here. I'm not articulating it well. All right. So jumping to tactics. What the hell do I do? Now that we understand, hopefully, the theory of this, of what matters and what doesn't. We can kind of focus on the tactics of how, what are the things that matter and what exactly should I do and where should I focus for my first 10 customers and how does that fit into the process of generating this complex system that works. The whole system, the way to think about this, we'll start at the top here. The whole system at the top is We're building a system to, to repeat customer success stories, a system to repeat case studies. And that system has to start from basically pipeline when we talk to people or when they learn about us to the sales process, which often is us talking on Zoom one-on-one, but it could also just be the process by which somebody becomes a user. Of our product or a buyer of our product. And then the delivery and CS process, which is how do we get from someone buys our product to someone says hell yes. Think about this. This is the go-to-market system, but this is also like sell and deliver to figure out what you sell and deliver. This is the end-to-end system. And so we have to optimize for the whole system. And so the way to think about this is that early on, what matters in your first 10 customers is figuring out how do you get to hell yes, by which I mean retention or upsell or expansion, what, like, whatever, whatever hell yes means. And how do you figure out what that hell yes is? How do you do that by any means necessary? There's a YC quote of do things that don't scale. I just like the, the corollary of that, which is just don't do things that scale. Don't even think about scale. Just figure out what hell yes is in their terms. The sales process and the pipeline, basically these things are less important because you don't know what hell yes is. And so what I've tended to see work pretty well is on pipeline, instead of trying to figure out what's the scalable approach to generating pipeline, right? How do we do predictable revenue and blah, blah, blah, blah, blah? Like, it's okay to use founder magic. It's okay to build an advisory, a customer advisory board and give them discounts and blah, blah, blah. Like, it's okay to bring in people who, um, right, like, aren't totally cold. As well, because the point of this is not to figure out the scalable pipeline source. The point of it is to figure out what hell yes is, and based on that, we can then re— reverse engineer what's the right pipeline source, what's the right market. On the sales process as well, like, you don't need to be using a formal sales process. It's often counterproductive to get a sales coach at this stage. Because they want to create a structured sales process. At this stage, we really don't even know what we're selling. So beg, do whatever it, you know, do whatever it takes. Use a theoretical success story like— anyway, I have other videos on how to think about sales at this stage. What really matters is delivering by any means necessary and figuring out what their hell yes is. Now you do want to have 5 to 10 sales conversations a week. If I do recommend one-on-one sales conversations, but you just do that through founder magic and that's totally okay. Now, once you have the shape of what a hell yes looks like, you then focus on two things. You basically systematize that customer success story and use it in your sales process and design your delivery process to get people to hell yes as quickly as possible. So the way to think about this is when you figure out what hell yes is, you want to build a bullet train to get new customers to hell yes. And in your sales process, you want to use the success story that you have and kind of show that to people and say, is this the kind of success that you wanna want, right? And you can use that as your sales process. You use the success story to repeat the, the success story. And what you're trying to do is you're trying to optimize this part where can we repeatedly get people to hell yes retention, right? How do we, how do we figure that out? Again, at this stage, you still want to be having a bunch of customer conversations, but this doesn't need to scale a ton. You can still use your founder magic there. Then, right, once you, once you can repeat the success story, that's when you scale pipeline. That's when the kind of like finding a big growth lever actually matters. And so the point is, and it's usually actually something, your growth lever often emerges from the shape of the success story. It's something from what I've seen, it's not always something that's obvious here. And so, yeah, and so basically you figure out a scalable, cost-efficient channel for, for growth and you just like, as you put more volume through this system, stuff's gonna break. You're gonna need to hire people. This is when it's really helpful to bring in like a traditional sales coach and have them help you optimize the system and have the system be able to support more volume, aka like scale, right? And so, so yeah, you debug and enhance this. And then over time, right, the system works and constantly repeats. And yeah, the game is like, don't get distracted. Don't become a bureaucracy. Defend the success story. Watch through your customer conversations. What things are they talking about that, that gives you the shape of what comes next? So for me, our first 300 customers, I onboarded one-on-one, which hurt a lot. Through that process though, I kept hearing similar things. Which led to the development of our second product, which was really the killer product for us. And so, yeah, do more of what works, see, see what happens, solve problems as they unfold. One last PS here before I end this video that like 6 people are going to watch. Sales doesn't have to suck. As a founder, I always found early stage sales to be scary, honestly. And I, over time, I learned that sales doesn't have to feel salesy, or like how you would think of like used car lot sales. The approach to sales that I found works is creating the feeling that you're sitting on the same side of the table as your prospective customer, looking at this customer success story that you have and letting that story do the lifting. And you're just looking at that story together and seeing what resonates and what doesn't, what works for them and how they're different versus you sitting across the table trying to sell them. And so anyway, hope that helps as a framing on the sales process. Yeah, reach out, like, if this is helpful, feel free to get in touch. My website is that. You can get access to some of my other, like, playbooks. I think I have some other videos there. And like, if you're interested in that program I mentioned, there's more contacts there, or reach out. I write probably the nerdiest newsletter on the zero-to-one stage on product-market fit and that stuff. And so check that out. Calendly, I hesitate to put this here because last time I put a video out with my Calendly in it, I got wrecked for like a month. Anyway, do what you will. Please at least read this stuff before. And then here's my email. Send memes. Hope this helps.